Commodity

Summary: Electricity is a commodity, future contract on the price of electricity is a security and payment of electricity with a tender or through debt note is a currency. Deriveum is like electricity, as it is neither extinguishing debt nor is its value derived from underling asset.

A legal classification of the Deriveum token is needed for a number of purposes. As it is an innovative, digital and public collateral, we will first explore what it is not, narrowing down the asset classes in a process of taxonomic induction.

The first issue is whether the Deriveum token may be considered currency. In legal terms a currency is legally recognized tender (tangible or electronic) of payment, and in essence, it is an issued debt note. In most cases cryptos are not legally recognized as debt notes, not least because there is no debt. What is more, our tokens are not crypto currencies (like Bitcoin or Ether), but useful assets that may be purchased with the cryptos. Understandably, our first conclusion is that in legal terms the Deriveum token is neither a currency nor or a debt note.

Secondly we should determine if it is a security. There have been a number of wide-ranging legal definitions of the latter. The US security laws incorporate the basic logic of SEC v. W.J. Howey Co., where the US Supreme Court states that “[a]n investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.” As the Deriveum token does not promise or guarantee any profit, and it is not backed by any collateral other than its own usefulness, it is clear that the token is not a security from the US regulatory perspective. The EU’s MiFID II (Directive 2014/65/EU) does not cover crypto-based assets as ‘’transferable securities” under art. 4.1 (44) either[1]. The Deriveum token cannot be classified as a security because it is not a debt note, it provides no income by itself, it doesn’t arise rights of profit and is not based on trust between the issuer and the user.

Among the large classes of assets, the token is most closely aligned with a commodity. The EU legal definition is contained in Delegated Regulation (EU) 2017/565, as “any goods of a fungible nature that are capable of being delivered, including metals and their ores and alloys, agricultural products, and energy such as electricity.” Deriveum is useful for industrial purposes only, it is limited in number, identical in comparison and the titles are directly with the owner of the asset. There are a number of peculiarities, such as the intangible nature of the token as well as its decentralized storage method. However, those peculiarities – as with the case of electricity – do not diminish or alter Deriveum’s legal nature.

As a conclusion we may assert that the Deriveum is a commodity and will be used as such.

[1] Please also see ESMA determination on securitized derivatives at https://www.esma.europa.eu/sites/default/files/library/esma70-872942901-36_qas_commodity_derivatives.pdf

Support

Social Media

 

Powered by